How India can win in a rewired global economy
Even in this global landscape of heightened volatility and uncertainty, strategic shifts are creating unique opportunities. India's 'China Plus One' gains have been uneven. But
Even in this global landscape of heightened volatility and uncertainty, strategic shifts are creating unique opportunities. India's 'China Plus One' gains have been uneven. But the smartphone success story demonstrates what's achievable when policy, infrastructure and investment align. Electronics leads. But integration can deepen across sectors like auto components, automobiles, pharma and engineering goods.India is well-positioned to capture a larger share of low- and mid-tech manufacturing as supply chains diversify. To achieve this, it requires a pragmatic stance on China. Proliferation of FTAs should also open an even wider market for exporters.A fundamental rewiring is underway, where FDI flows are shifting from efficiency-seeking to security-seeking.According to fDi Markets, strategic sectors now command 73% of global FDI, with three-quarters of this concentrated in the US-aligned bloc. This reflects governments' determination to secure critical supply chains within trusted geopolitical boundaries. For India, this makes strategic neutrality essential - maintaining productive ties with both the US (large consumer market and dominant driver of AI capex) and China (supplier of intermediate goods and critical minerals).It must also establish a presence in future-shaping sectors like data centres, semiconductors, EVs and advanced manufacturing.
India ranks among Asia's top four destinations in FDI attractiveness alongside Singapore, Vietnam and Malaysia. So, conditions are in place. In a world where supply chains are weaponised, self-reliance in strategic sectors will ensure resilience while creating economic opportunities across three critical domains:India's defence exports grew 19x in FY16-FY26. As defence spending moves toward 2.5-3.0% of GDP and 75% of capex is reserved for domestic firms, multiplier effects and tech spillovers will increase, supporting further export growth to the 'global south'.Aggressive diversification will create opportunities in renewables, nuclear, smart grids and battery storage. India's cost advantage also positions it as a key exporter of solar cells and panels.Strategy in critical minerals includes building domestic processing capacity, forging new global partnerships, advancing recycling and increased stockpiling. While China is likely to maintain near-term dominance, India's focus on supply security is important for EVs, RE and defence.AI presents India's most complex challenge. Currently, disruption dominates, particularly for IT and BPO sectors that face revenue deflation as AI-driven productivity gains are passed onto customers.
The BriefWire